European markets lifted as trade tensions ease

Global stock markets have been pushed around by the trade tensions between the US and, notably, China, and signs of a softer tone from the Trump administration has given them a lift today. David Madden, market analyst at CMC Markets, said:

Equity markets are higher now that it seems the US is taking a more relaxed position regarding investment from China. The Committee on Foreign Investment in the United States (CFIUS) will access international investment in the US. Traders are viewing this less aggressive way to monitor overseas investment in the US as a boost for international relations.

Traders welcomed the initiative as the government now appears to have a body that will deal with the issue, and it should lead to less confusion about which investment is allowed and which isn’t. Recently, different members of the Trump administration seemed to be on different wavelengths from one another, and that added to the uncertain economic environment.

Dealers are now happy to enter the market and pick up relatively cheap equities. The trade dispute is still ongoing, so investors’ optimistic mood may not last too long.

Rising oil prices have also helped push shares higher, particularly in the commodity sector. The final scores in Europe showed:

The FTSE 100 finished 83.77 points or 1.11% higher at 7621.69

Germany’s Dax added 0.93% to 12,348.61

France’s Cac closed up 0.87% at 5327.20

Italy’s FTSE MIB rose 0.65% to 21,557.91

Spain’s Ibex ended 0.22% higher at 9658.6

On Wall Street the Dow Jones Industrial Average is currently

Elsewhere John Lewis Partnership warned this year’s profits would be well below last year’s figures, and said it was getting rid of five Waitrose stores. Our full story is here:

Five Waitrose stores to close after John Lewis issues warning on profits

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On that note, it’s time to close for the day. Thanks for all your comments, and we’ll be back tomorrow.

Over in the US, and President Trump is back tweeting about Harley-Davidson (which said it would move some production out of the US due to his tariff plans) and not, perhaps surprisingly, about China (there is still plenty of time for that, of course).

Donald J. Trump (@realDonaldTrump)

Harley-Davidson should stay 100% in America, with the people that got you your success. I’ve done so much for you, and then this. Other companies are coming back where they belong! We won’t forget, and neither will your customers or your now very HAPPY competitors!

Markets continue to recover after the signs that the Trump administration may be taking a more conciliatory tone with China. Chris Beauchamp, chief market analyst at IG, said:

Equities are reaching for the stars once again, with healthy gains across the board. Many market watchers will remember when it was the Fed that was scared into policy changes by financial market volatility. Now the financial markets appear to be doing the same to the US president. Trade war concerns remain high on the agenda, but the White House’s comments on using existing legislation rather than new rules has helped boost risk appetite.

Having tied himself so closely to the stock market early on in his presidency, Mr Trump will be wary of anything that prompts a sustained rout in equities. Of course, he may decide that the political advantages of talking tough on trade outweigh those arising from a buoyant stock market. But for now investors will be pleased that a softer tone is being adopted.

Also helping equity markets this afternoon is oil, which has enjoyed a stellar week. OPEC’s move to raise production did not dispel concerns about a supply shortage, and those concerns have only increased thanks to US jawboning on Iranian exports, a Canadian shutdown and now a fresh drop in US crude stockpiles. So long as OPEC keeps a lid on production increases, we can expect further bullish momentum in oil.

This looks a sensible path for JLP to navigate given the structural shifts across the current retail landscape. The group is playing to its own core strengths with an increased focus on differentiation, innovation and enhanced service. The work in recent years from a balance sheet perspective (slowed the investment in physical space growth, reduced the discretionary pension increases and reduced partnership bonuses) has put it in a stronger position. The stronger balance sheet allows a commitment to continue to invest £400- £500m per annum over the next three years. The group is targeting a net debt to EBITDA of 3.0x ratio over the next five years, suggesting capital discipline over the medium-term.

JLP is now being more realistic in recognising that group profits need to be rebased as it faces into its challenges and charts its own path. The expectation is that there will be no let-up in the headwinds and it is right that the group is being more realistic in its appraisal of the sector. Perhaps other retailers might also want to consider the wider sector implications of JLP acknowledging the current retail environment.

Oil price jumps after fall in US stocks

Crude prices have been rising in recent days, giving a boost to commodity stocks and markets such as the FTSE 100 where mining and oil companies are well represented.

Despite Opec agreeing to increase production, the price was supported on Tuesday by Donald Trump calling for buyers to cut their purchases from Iran, Opec’s third largest producer.

Now a bigger than expected drop in US crude stocks has suggested growing demand, and pushed prices higher. Crude stocks dropped by 9.89m barrels last week, compared to expectations of a 2.6m decline. Gasoline stocks grew by 1.16m but this was less than the forecast 1.3m increase.

Brent crude is now up 2% at $77.82 a barrel, while West Texas Intermediate - the US benchmark - has added 2.7% to $72.5.

US treasury secretary Steve Mnuchin is predicting strong growth for the country’s economy in the second quarter. He told CNBC he was expecting a “big number” . And although he made it clear he had no advance sight of the figures, the comments have helped push Wall Street even higher.

Paul R. La Monica (@LaMonicaBuzz)

Yee-haw! Stocks are up today as it looks like Mnuchin may have saved the day. For now at least. Volatility is back with a vengeance and trying to predict DC policy moves remains a crap shoot.

There are also some new US figures showing an improvement in the goods trade balance to -$64.85bn in May, down $2.5bn.

Exports for May were up $2.9bn to $143.6bn, while imports edged up $0.4bn to $208.4bn.

James Knightley (@Knightleyeco)

May US goods trade balance improves! Big surprise given massive tax cuts were thought to boost demand for foreign consumer goods. Best figure for 9 months. Will help 2Q growth story even more. Atlanta Fed Nowcast model currently has 2Q GDP penciled in at 4.7% annualised growth. pic.twitter.com/zlmbQVFtQC

Still with the US, and new orders for capital goods fell unexpectedly in May, although April’s figure was revised sharply higher.

The commerce department said that orders for non-defence goods excluding aircraft slipped by 0.2% compared to forecasts of a 0.5% increase. But the April figure is now reported as a 2.3% rise, much better than the original estimate of a 1% gain.

Analysts trying to work out how this might affect US interest rate policy might have a difficult time, says David Morrison, senior market strategist at GKFX:

Over the past few years investors have got used to equities rallying on the back of data releases, irrespective of the numbers surprising to the upside or downside. Strong data has reinforced the view that the US economy is powering ahead, at least when compared to other developed countries. But at the same time, disappointing numbers have led to the belief that the US Federal Reserve would decelerate monetary tightening. After all, that’s what we’ve seen repeatedly from both Janet Yellen and her predecessor as Fed Chair, Ben Bernanke.

However, there’s a growing perception that the current chair, Jerome Powell, is doing things differently and that under his lead the Fed is prepared to tighten unless there’s a significant market disruption. Consequently, data disappointments are unlikely to receive the positive reaction that they once did. This shift in sentiment is something to be aware of as we approach the second half of this year.

Markets rally as US rows back from China clash

Newsflash: Donald Trump may have backed away from escalating the trade dispute between America and China.

US officials have revealed that the Trump administration is moving away from plans for a blanket ban on Chinese firms buying stakes in US companies.

Instead, the US government is pushing Congress to strengthen a panel called the Committee on Foreign Investment (CFIUS), to protect US intellectual property rights.

That’s a less confrontational approach, which will calm fears that the row between Washington and Beijing was escalating ever higher.

Earlier this week, there were reports that the US would use national emergency laws to prevent Chinese companies from investing in the US - and possibly other countries too.

But now, the White House seems to have backed away from such an inflammatory step.

One official told CNBC that:

“We considered a number of different mechanisms for addressing the concerns articulated regarding the acquisitions of sensitive technologies that may threaten U.S. national security, national interests.

In the end the president and his advisers settled on the idea that we have a strong and effective mechanism through the CFIUS process ... and that is a mechanism that can be used in the flexible and aggressive way to combat the practices that are troubling to the president.”

Investors have welcomed the news, sending shares higher.

In London the FTSE 100 index is now up 55 points, or 0.7%, and Wall Street futures are recovering too.

James Hughes (@James_HughesUK)

Stock markets seeing this as a deescalation of Trade Wars. Stocks up, Yields up, Dollar off. Risk back on, at least for now.